TaxTMI 
TaxTMI 
2013 (10) TMI 765
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.... section 13(1) of law. 3. The appellant prays that the order of the Commissioner of Income-tax (Appeals)-I, Mumbai, be set aside and that of the Assessing Officer be restored." The assessee is registered with the Director of Income-tax (Exemption), Mumbai, under sections 12A and 80G of the Income-tax Act, 1961 (the Act). During the year under consideration the Assessing Officer denied the benefit of exemption to the assessee and has assessed it at an income of Rs. 8,15,58,623 in place of nil income returned by the trust. The Assessing Officer issued notice to the assessee under section 142(1) which has been reproduced in the assessment order and required the assessee to show cause as to why exemption claimed by it under section 11 should not be denied. The Assessing Officer has referred to the objects of the trust which were also mentioned in letter dated November 11, 2009 filed by the assessee as under: "(a) To create a fund primarily to promote charitable, educational, moral, socio-economic development and religious activities. (b) To propagate the Islamic faith. (c) (i) To establish, construct, maintain, manage, administer, assist, encourage, promote and extent fi....
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....ecause of its other objects, if such trust had been established on or after 1st April, 1961. This was the fate of the trust in Ghulam Mohidin Trust v. CIT [2001] 248 ITR 587 (J&K), which as a trust established after April 1, 1961 had to conform to the requirement of section 11. Since it was a public trust partly religious, it was found to be ineligible for exemption, following a number of decisions of the Supreme Court as for example in State of Kerala v. M. P. Shanti Verma Jain [1998] 231 ITR 787 (SC)." Accordingly, the Assessing Officer held that the trust of the assessee is mixed trust and the provisions of section 13(1)(b) are squarely applicable in the case of the assessee. However, the assessee contended that benefit ofexemption cannot be denied to the assessee in view of the decision of the hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj). The learned Assessing Officer did not accept such submission of the assessee on the ground that in the said decision of the hon'ble Gujarat High Court the society was a charitable trust as against society being religious trust in the case of the assessee. It is in this manner the....
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....est of diverse religions followed by its members and exemption under section 11 was granted. (d) Reference was made to Schedule B of the accounts of the society trust to show that out of total expenditure incurred by the assessee of Rs. 5,53,27,631, an expenditure of Rs. 4,84,61,830 was incurred on a peace conference, which was focused on creating communal harmony and an awareness and understanding of Islam and its message of peace for entire humanity, to help remove misconception, false fear and hate of Islam and Muslims globally, to help realise that justice, human rights, moral values and peace be it on any individual or at a worldwide collective level, are a must for effective human progress and realistic global unity (sic). It was submitted that in the peace conference there were eminent speakers from Islamic faith from the world over as well as from other communities. The conference was also attended by Shri Anwar Ibrahim, Ex Deputy Prime Minister of Malaysia, Shri Digvijay Singh, General Secretary of All India Congress Committee, Sri Ravishankar, Founder of Art of Living, Shri Mahesh Bhatt, a noted film directors, Shri Hosbet Suresh, Retired Mumbai High Court judge, Shri ....
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....ness. Thus the learned Commissioner of Income-tax (Appeals) arrived at a conclusion that advancing any object beneficial to the public or a section of public as distinguished from an individual or group would be a charitable purpose. The object of the trust is, therefore, to provide the benefit to all the communities by giving a clear and loud message of peace as a whole. The aim and object cannot be held as object for particular community or caste and thus not confined to Muslim alone but all community at large. The provisions of section 13(1)(b) are not applicable. The decision of the hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj), is squarely applicable. Denial of exemption under section 11 is not justified. The Director of Income-tax (Exemption) had granted exemption to the assessee on the basis of trust deed filed by the assessee and also did not point out any violation of any of the provisions of the trust deed. Therefore, the learned Commissioner of Income-tax (Appeals) has held that the Assessing Officer was not justified in denying the exemption to the assessee. He directed the Assessing Officer to allow exemption to ....
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.... it was submitted by the learned authorised representative that the Assessing Officer has held that trust of the assessee is a mixed trust. Firstly, he invited our attention to the following observation of the Assessing Officer at page 2 of the assessment order : "From the aforesaid objects of the trust and other objects as mentioned in the trust deed which are charitable in nature it is evident that the assessee-trust is 'religious and charitable trust'." Secondly, he also invited our attention the following observation of the Assessing Officer at page 3 of the assessment order. "Accordingly, it is held that yours is a mixed trust and the provisions of section 13(1)(b) is squarely applicable in your case. Accordingly, you are requested to show cause why exemption claimed should not be denied." He thus submitted that the Assessing Officer has himself admitted that the assessee-trust is a mixed trust. He invited our attention towards the following observations of the hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj) to contend that the provisions of section 13(1)(b) will not be applicable to a mixed trust which....
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....y way of an order dated December 30, 2008 passed under section 143(3) of the Act. He submitted before us a copy of the detailed reply filed by the assessee running into 13 pages and the assessment order, vide which the assessee's return filed at nil was accepted with the following observations : "The trust is registered under the Bombay Public Trusts Act, 1950 and has also been registered under section 12A of the Income-tax Act, 1961 by the Commissioner of Income-tax, Mumbai City-1, Mumbai. The assessee is not registered under section 80G of the Income tax Act. The aims and objects of the trust are : (1) To create a fund primarily to provide charitable, educational, moral, socio-economic development and religious activities of the Islamic faith. (2) To propagate the Islamic faith. As mentioned in the trust deed, the assessee-trust is following the religious activities. The assessee has submitted the explanations which were called for during the course of assessment proceedings which were examined and discussed. Subject to the above remarks, the assessee's total income is computed as under : Total income as per statement of income-Rs. nil Assessed und....
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....1." To further support such proposition the learned authorised representative relied on the following decisions : (1) CIT v. Shree Ram Memorial Foundation [1986] 158 ITR 3 (Delhi) : In that case the Department had already allowed similar type of expenses in the earlier three years and noting that there was no change in law it was held that it was not appropriate on the part of the Revenue to take different view suddenly and levy heavy tax on the assessee when it was the same project going on for all these period. It was found that the assessee's work once was recognised as charity for several years and the assessee was carrying on same object, it was not for the court to reopen the same point from time to time. (2) Samaj Kalyan Parishad v. ITO [2007] 291 ITR (AT) 1 (Delhi). In this case relying upon rule of consistency the relief was held allowable to the assessee with the following observations (page 15) : "15. Moreover, the Commissioner of Income-tax took proceedings under section 263 to deny the exemption to the assessee-trust for the assessment years 1978-79 and 1979-80 but dropped the proceedings. For the assessment years 1984-85 to 1999-2000 the Assessing Offi....
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....the aforementioned case it has been held that where the trust is composite, i.e., for religious and charitable purposes, then it will not be covered by the provisions of section 13(1)(b), which has been applied by the Assessing Officer. He submitted that though the objects of the assessee's trust contain the provisions regarding activities of religious nature but that is not confined to a particular class, but is for the benefit of a entire Muslim religious community. He submitted that the hon'ble Supreme Court in the case of Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC) have approved the decision of the Privy Counsel in the case of Oppenheim v. Tobacco Securities Trust Co. Ltd. [1951] AC 297 (HL), wherein it has been held that a group of persons may be numerous, but, if the nexus between them is their personal relationship to a single propsitus or to several propositi, they are neither the community nor a section of the community for charitable purposes (sic). Referring to the same their Lordships have observed that it is unable to comprehend how the trust of Rana Caste started in Ahmedabad can be regarded as having been introduced in the caste by consider....
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....ate family trust, therefore, the same is not applicable to the facts of the present case. He submitted that as per well established principle of law, for applying decision a context considered by the court should be considered relevant. Alternatively, he submitted that what has been assessed by the Assessing Officer is the gross receipts without giving set-off of expenditure. He submitted that only net surplus, if any, could be assessed. For supporting this proposition the learned authorised representative relied upon the decision of the Tribunal in the case of Nirmal Agricultural Society v. ITO [1999] 71 ITD 152 (Hyd), wherein it has been held that where the assessee has been assessed in the status of association of person denying relief under sections 11 and 13, the Assessing Officer could assess only net income of the assessee and not the gross receipts. Thus, it was submitted by him that the order of the learned Commissioner of Income-tax (Appeals) should be upheld and the Departmental appeal should be dismissed. We have carefully considered the rival submissions in the light of material placed before us. We have also carefully gone through the assessment order, the order....
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....e trust. In appeal the Appellate Assistant Commissioner found that the trust is partly charitable and partly religious in nature. Therefore, the Appellate Assistant Commissioner held that part of the income, which was used for charitable purposes, was exempted under section 11 of the Act. He directed the Assessing Officer to bifurcate the income of the assessee in the two objects and allow exemption in respect of the part which was applied for charitable purposes. The Appellate Assistant Commissioner also held that the income of the trust was properly applied for the purposes of the trust notwithstanding the fact that the assessee had used the same in the construction of building for commercial purposes. The Tribunal after analysing the clauses 13 and 14 of the trust deed held that the trust was partly charitable and partly religious and as there was no apportionment of income between two objects of the trust and it was left to the exclusive discretion of the trustees to spend whatever they like on any objects, the assessee was not entitled to claim exemption under section 11 of the Act. Their Lordships of the High Court found that clauses 13 and 14 of the instrument which conta....
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....has limited the application of the entire income to a particular community. From the facts of that case it was observed by the hon'ble High Court that the trust was in the nature of private religious trust and therefore, it did enure for the benefit of the public. These observations of their Lordships are stated in paragraph 5 of the said judgment. Therefore, to reject the claim of the assessee regarding exemption under section 11 reliance cannot be placed on the decision of the hon'ble Jammu and Kashmir High Court in the case of Ghulam Mohidin Trust v. CIT [2001] 248 ITR 587 (J&K). It has already been pointed out that the Assessing Officer has not discussed the activities of the assessee carried out during the year under consideration. The learned Commissioner of Income-tax (Appeals) has discussed the activities of the trust in detail and he has found that out of the total expenditure incurred by the assessee at Rs. 5,53,27,631 the major expenses of the assessee is on conducting a peace conference which were to the tune of Rs. 4,84,61,830. It was a 10 day peace conference and the focus was to create communal harmony and awareness and understanding of Islam and its messa....
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....lause 13(1)(b) cannot be applied as it is applicable to purely charitable trust as held by the hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj). The relevant observations have already been reproduced in the earlier part of this order in paragraph 13. Therefore, also benefit of exemption under section 11 cannot be denied to the assessee under section 13(1)(b) of the Act. Though it is not the case of the Assessing Officer that exemption under section 11 is not allowable to the assessee applying the provisions of section 13(1)(a), but as this ground has been taken up by the Revenue this aspect of the matter was also argued by the learned authorised representative. According to his submission, section 13(1)(a) is applicable only to the trust for "private religious" purpose which does not enure for the benefit of the public. Section 13(1)(a) read as under : "13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof (a) any part of the income from the property held under a trust for private religious purposes which does not enu....